A surge in demand for compliance staff from asset managers has led to a talent war with banks and insurers and an upward spiral in salaries.

Asset managers’ hiring spree has been driven by a slew of regulations hitting the sector. Among the regulations fuelling demand is the Alternative Investment Fund Managers Directive, which comes into full force in the UK on July 22 and links the number of compliance staff to assets under management.

Andrew Formica, chief executive officer at Henderson Global Investors, said: “The cost of regulation and compliance is going through the roof and the supply of quality and talented individuals in that space is out of kilter with the demand. The highest wage inflation that we have is in the assurance functions.”

Figures from recruitment firm Robert Walters, released last month showed the number of advertised jobs in a risk function increased by more than 16% for the first quarter of 2014 compared with a year earlier.

Demand for compliance staff is hiking up salaries in the sector, according to recruitment consultant McGregor Boyall.

Andrew Adams, head of compliance, audit and operations at the company, said banks, insurers and fund firms have been engaged in numerous “remediation projects” to repair reputations and enhance their risk, compliance and audit functions.

He said: “Some firms are getting 50 to 60 people in at a time. From this, you have inflated rates. Some of these people have 12-18 months’ experience.”

He added: “There are more jobs on the market. We are seeing a major upturn. Salaries year on year are up by between 11% and 14%. There is a war on talent out there again. It feels like the late 90s and early 2000s and I think it is going to continue.”

Robert Higginbotham, head of global investment services at asset manager T Rowe Price, said: “I think compliance has raised the minimum economic level of assets under management for running a fund management business from £1 billion to between £3 billion and £5 billion.”

The recruitment war is not limited to senior compliance staff. For junior roles, agencies are carrying advertisements for staff from other areas of finance who would be willing to retrain in order to meet demands.

One Asian bank seeking compliance staff in London last week was offering a position as “Compliance Guideline Monitoring Associate” saying it would pay up to £65,000, stating: “Some compliance experience is preferred, although candidates from other areas with an exposure to, and interest in, compliance are welcomed.”

Huw Jones, director of governance (Emea) for executive search firm Leathwaite, said: “Asset managers have typically been behind the banks when it comes to growing their compliance teams, but this is changing.”

He added: “Regulation has been part of this but also investors expect the managers investing their money to be fully compliant and not exposed to a regulatory fine.”